Blog on the Run: Reloaded

Wednesday, June 4, 2014 11:21 pm


Nine years ago today, my father died. He was 75 and a self-employed financial consultant who was still working about 30 hours a week right up until his final illness (acute pulmonary fibrosis), which lasted a couple of weeks before his death.

From an early age, I heard Dad talk about the importance of saving and investing, and I did the best I could to follow his advice. As I got older and better able to grasp the mechanics, he talked about the stock market as the best long-term investment vehicle for retirement (although he did say that once I hit 50 I should start swapping some equities for bonds).

To the best of my abilities, I have followed his advice. I won’t give you numbers, but I’ll tell you the following: I don’t have a ton of ready cash and never have. But were I to die tomorrow, my family would be pretty well fixed, especially considering I was a journalist, and thus not particularly well paid, for most of my career. Like many Americans, I haven’t gotten a dime in retirement matching for coming up on about seven years now, but — although no one can read the future — I think my family and I will be OK assuming I live to 67 and actually get to retire.

But Dad didn’t live long enough to see the mortgage bubble burst. He didn’t live long enough to hear all the revelations about bank and nonbank and insurance-company and security-rating shenanigans on a scale that dwarfed the crimes of the S&L crisis two decades prior. He thought repealing Glass-Steagall was a bad idea, but he didn’t live long enough to see just how bad. For that matter, he didn’t live long enough to see high-frequency trading and the ease with which the practice makes front-running a trade possible.

So although I’m remembering Dad today with warmth and his passing with sadness, for some reason the Dad thought that has been most on my mind today has been: I wonder what he would make of today’s financial markets? Would he still consider it possible for a single, well-informed investor to do OK? Or would he be convinced, as I have been, that most of the market is a rigged game — that there is a club and that most Americans like me aren’t in it?

(And I’m writing from a middle-class prospective. My problems don’t even begin to touch the problems of the working poor, who are being robbed outright.)

I don’t know what he’d think. All I do know is that while he certainly wasn’t perfect, in his professional life, to the best of my knowledge, he acted with integrity and took seriously his fiduciary duty to his clients. I’m struggling to name a commercial or investment bank that exists today that I’m confident does the same thing.

Tuesday, October 6, 2009 8:50 pm

My first and last bit of investing advice …

Filed under: I want my money back. — Lex @ 8:50 pm
Tags: ,

… comes from Forbes, via Marketwatch’s Paul Farrell: Don’t invest.

No, really, that’s pretty much what he says, at least as it comes to individual stocks:

No wonder “too-stupid-to-fail” banks prefer gambling with [high-frequency-trading]-Quants over helping small commercial banking customers. This is their cash cow generating future earnings: As Forbes recently put it in “The New Masters of Wall Street” “… even as financial markets collapsed last year, high-frequency traders collectively enjoyed $21 billion in gross profit” while “some high-frequency traders are sending out 1,000 orders a second.”

Worse yet, if America’s 95 million individual investors do try to play this new game against these HFT-Quants, they will lose big. …

Forbes bluntly put it this way in a sidebar: “Trading for Dummies” “The role of sucker on Wall Street has traditionally been played by retail investors.” That’s you.

Don’t trade … the more you trade the less you earn

Nevertheless, Forbes offered some sound advice: “If every penny counts for you, there are still ways to avoid being the dumb money in a trade.” The usual tips: Streaming quotes, limit orders and “pay attention to premarket action.”

But in their fourth “Trading for Dummies” tip they really show their cards, telling Main Street investors something we’ve been preaching for years: “Don’t day-trade: It’s a losing game to try to make money chasing momentary market inefficiencies. Too many pros with too much computing power are already at it. Instead, decide on a set of long-term investing goals and trade infrequently to achieve them.”

Rigged. Game.

You can never outshoot a computer processor. Wetware just isn’t fast enough.

Until securities-trading law is seriously rewritten and brutally enforced, you’re almost better off burying your money in the back yard.

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